Cisco CFO Looks Toward LTE Dollars

NEW YORK ( TheStreet) -- What follows is the transcript of an interview of Frank Calderoni, chief financial officer of Cisco ( CSCO) by TheStreet's James Rogers. The transcript has been edited for length and clarity.

TheStreet: Frank, the sense that I'm getting is the U.S. business, for you, has improved and I saw the enterprise is up 9% year-over-year...service provider up 13 percent. Is that right?

Frank Calderoni: Yes. That's correct.

What do you think is driving that and also, why are we getting this positive sense from you, about the U.S. business, when it seems that a lot of your peers have been putting out more of a negative commentary on it?

Calderoni: Well, James, if you look at it, we said this on a call. If you look at the U.S. business, it's somewhat mixed. On the challenging side, we have public sector, which we've seen now for a number of quarters, where our business is not performing the way it was over a year ago and so that's, basically, some of the challenges with some of the budgets and states, as well as at the federal level, and then, the segment that you talked about, as far as the enterprise and the service provider, the United States clearly has had a much more positive.

So I would say it's somewhat mixed. If you look from an order rate perspective, we talked about the Americas kind of being up 2% and so it's various ups and downs within that. On the segment that you mentioned, enterprise, we're doing well across the portfolio in the enterprise and then, on the service provider, it's clearly with the end-to-end and the NGN network that we have, offering both, from the core all the way to the edge, has really been very successful with our customers and we've seen that improve now, for a number of quarters.

That's interesting. I mean not on the enterprise, specifically, because I know that last quarter, good enterprise business also helped boost your numbers, then, as well. What do you think is continuing that momentum because, going into earnings, I think there were a lot of people who expected to see a slowdown there but we actually seem to be seeing the reverse?

Calderoni: Well, you have to also look at some of the segments, within enterprise, that do it better than others.

So that's part of it and then it's, also, looking at the spending on the network in some of the areas and the products that we have. If you go back several quarters ago, spending was conservative there. We're seeing a little bit more balance for us in the spend with enterprise and it's one of those, we're not signaling anything going forward, we're just going to take each quarter as we see it and make sure that we factor it in and work it customer by customer.

Right. Excellent. But overall, you do feel that the U.S. is improving. Is that right?

Calderoni: I would say, in those segments. Again, we still have some challenges on the public-sector side and we'll have to wait and see, now that the election's behind us and once we get into the new calendar year, whether or not any change in some of the budgets, again, at the state and federal level will present us with more opportunity.

Great stuff. And on the service-provider side around the U.S., obviously, we could be gearing up for quite a big year in the service provider business in 2013. I mean, what are you guys expecting at this stage, around things like carrier Capex and a lot of the industry consolidation that's going on at the moment? I know John talked a little bit about Sprint (S)/Softbank on the call. I mean, do you see opportunities for you, around service provider, moving forward?

Calderoni: Well, first of all, I would say, James, that as far as the service-provider capex capital expenditures , actually, we've seen that from many of the large service-provider customers. I think that's going to continue to be, at least in the short-term, a bit more conservative from a spending standpoint but again, some of the areas, of course, with wireless and mobility, Wi-Fi, those areas from the service-provider standpoint are showing some growth.

If you look at it from the mobility standpoint, that's been a strong part of our business now for a number of quarters. Also, what's happening with the LTE and the expansion of that, I think that's helping to drive some business for us. So, I think, while the conservative spending's out there, there's certainly segments within the market that really align with some of the areas, that we have a strong portfolio to be able to go after that business opportunity.

Excellent. Excellent. And just as a final question, the fiscal cliff...it seems the fear of a fiscal cliff seems to have weighed quite heavily on a lot of your competitors. I'm not getting the sense that that was the case for Cisco (C). I mean, what are your thoughts around the possibility of a fiscal cliff? Do you think that we're talking ourselves into a situation that may not even present itself, ultimately?

Calderoni: It's hard really for me to speculate on that. The only thing I would say, James, is we support our government officials to work through this, knowing that over the next couple of weeks it's going to be a pretty engaged conversation within the House and the Senate, looking at the various elements of the fiscal cliff that need to be addressed.

I can say we have some confidence left to watch this closely and see how it plays out. One of the things separate from the fiscal cliff that we've been very much engaged in, in the past, and will be as we go into the new calendar year and that's corporate tax reform.

And that's going to be, I think, something that's going to be addressed next year and we expect to be a big part of that.

Okay. That's brilliant. Thank you very much for your time there and was there anything else that you wanted to add, Frank?

Calderoni: No, James. Just to recap, I think we delivered on record results this quarter, with the revenue growth to 6% and the strong earnings growth, per share. I think that really demonstrates, as we've talked about, the division strategies working, and as we said before, we feel now and we remain confident in the financial strategy that we laid out a year ago to our investors and our ability to consistently execute moving forward.